Calculate Cash Flows Nature\'s Way Inc. is planning to invest in new manufacturi

Question

Calculate Cash Flows

Nature's Way Inc. is planning to invest in new manufacturing equipment to make a new garden tool. The new garden tool is expected to generate additional annual sales of 2,500 units at $60 each. The new manufacturing equipment will cost $227,000 and is expected to have a 10-year life and $17,000 residual value. Selling expenses related to the new product are expected to be 5% of sales revenue. The cost to manufacture the product includes the following on a per-unit basis:

Determine the net cash flows for the first year of the project, Years 2–9, and for the last year of the project. Do not round your intermediate calculations but, if required, round your final answer to the nearest dollar.

Direct labor $ 8.00 Direct materials 22.00 Fixed factory overhead—depreciation 8.40 Variable factory overhead 3.60    Total $42.00

Explanation / Answer

Cornucopia Inc.

Cornucopia Inc.

Net Cash Flows Year 1 Years 2-9 Last Year Initial investment    -227,000 Operating cash flows: Annual revenues (2500 X60)      150,000     150,000      150,000 Selling expenses          7,500         7,500          7,500 Cost to manufacture (2500X(42-8.4)) (net of Depreciation)        84,000       84,000        84,000 Net operating cash flows        58,500       58,500        58,500 Total for Year 1    -168,500 Total for Years 2-9       58,500 Residual value        17,000 Total for last year        75,500

Related Questions

Navigate

• Browse (All)
• Browse C
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.